1.1. Problem
Endless growth and economic expansion has led to unprecedented changes in the state of the planet, so much so, that some estimates now place the global ecological footprint at 30 per cent higher than the Earth’s biological capacity, to produce for people’s needs (Sukhdev 2009 in Jackson 2009). While such estimates are difficult to make, there is little doubt that we are approaching important limits, some may even be passed. Indeed, many societies’, have come to view economic growth as synonymous with progress, prosperity and well-being (D’Alisa et al. 2015; Jackson 2009). However, six decades of economic growth has not brought about equal benefits; huge disparities in wealth means that the majority of the world’s population live without basic entitlements to adequate food, education, healthcare and employment (Robinson 2009 in Jackson 2009). These issues have led to increasing calls for transformation in the way that societies are organised, including new governance structures and institutions that create positive social and environmental outcomes (D’Alisa et al. 2015; Jackson 2009; Haapenen and Tapio 2016; Vatn 2015).
Increasing pressure on firms to do good and act responsibly has led to initiatives such as corporate social responsibility (CSR). Put simply, CSR refers to the integrating of social and environmental benefits into business strategies. However, while research suggests that there have been some improvements in this area, CSR can be considered more of an “add on” as opposed to a core aspect of many businesses (Vatn 2015 p.395), with many CSR efforts being small and focused on becoming ‘less unsustainable’ (Ehrenfeld 2008).
Against this backdrop and the realisation that ‘business as usual’ is not enough, new forms are emerging that place social and environmental good at their centre. One such model, that appears to have thrived in recent years is social enterprises. Social enterprises have been viewed as a new way of doing business, in the sense that they combine the social logic of a non-profit with the commercial logic of a business (Lee & Battilana 2014; Ferri and Urbano 2011; Vatn 2015;). These businesses transcend traditional for-profit/ non-profit boundaries and are set up to help solve societal problems (Schaltegger et al. 2016; Lundstrom et al. 2013). Through innovation, social entrepreneurs strive to create or enhance new products, processes or services (Bell 2012). The social enterprises that this research is focused on, are those that primarily work with environmental issues, hereafter referred to as environmental social enterprises
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(ESEs). ESEs have been described as having the potential to create a major shift towards a more sustainable economy (Schaper 2002). These businesses have been found to operate in a different way, with less concern for economic success and greater concern for the environment, and long term consequences of their business activities (Allen & Malin 2008 p.828; Harvey 2007).
However, ESEs may face considerable challenges in relation to legal form (Borzaga &
Defourny 2001), finance (Bell 2012; Gibbs 2009) and impact (Hockerts and Wustenhagen 2010) bringing into question their potential to subsist and generate wider change. For instance, many scholars have drawn attention to the conflicting nature of combining business with social and economic goals which may challenge environmental enterprises legitimacy and survival (Kirkwood and Walton 2014; Dixon & Clifford 2007; Lee & Battilana 2014; Lundstrom et al.
2013). ESEs may also struggle financially through lack of finance (Gibbs 2009), investment, (Bell 2012) or awareness of financial matters themselves (Randjelovic et al. 2003; O’Rourke 2005). Another issue is their potential for scaling up. Some environmental entrepreneurs have been found to place the environment before profits, (Kirkwood & Walton 2014) or to incur greater costs to protect the environment (Choi and Gray 2008). Hockerts and Wüstenhagen (2010) found that some entrepreneurs perceived growth as a threat to their standards. For these reasons, more research is needed to find out about the motivations, function and performance of ESEs.
It is important to mention that there is a substantial amount of research on the motivations of social entrepreneurs, however, few studies have looked at the motives of those that work specifically to address environmental issues (Allen & Malin 2009; Bell 2012; Kirkwood and Walton 2014). This research responds to a lack of empirical evidence in this field (Gibbs 2009;
Hockerts and Wustenhagen 2010), including the need to better understand what ESEs do and how they differ to conventional business models (Bell 2012; Schaper 2002). In particular, under what institutional conditions do ESEs survive while meeting social and environment goals (Lee
& Battilana 2014; Hall 2010)? And how does the structure help or hinder ESEs aims’ (Vickers 2010)? Institutional economics is a useful framework for exploring these dynamics, however, few studies have applied it within the proposed area (Lee & Battilana 2014; Meek et al. 2010;
Ferri & Urbano 2011). This study intends to fill this gap by using the latter framework to generate important insight into the potential and barriers of ESE institutions.
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1.2. Purpose
The purpose of this study is to find out about the strengths and limitations of ESEs, including how they can contribute to creating more sustainable societies. This study focuses particularly on ESEs based in the United Kingdom (UK). Using institutional economics as a framework, this study will explore what characterises these businesses, how they function and perform, and finally, what their key strengths and limitations are, as an alternative institution for environmental governance.
1.3. Research questions
Given my purpose, the following research questions have been developed:
i) What characterises environmental social enterprises?
What are the entrepreneur’s motivations? What do environmental social enterprises do as a business? What environmental challenge do they seek to address and how?
ii) How do environmental social enterprises function?
How are they financed? What legal form have they chosen and why? To what extent does the social enterprise model1 and legal form help or hinder the enterprise’s aims?
iii) How do environmental social enterprises perform?
What business practices do they have? Do they face conflicting goals? If so, how do they make decisions in the face of such conflicts? What are their views on upscaling? What other barriers do environmental social enterprises face that influence their performance?
iv) What are the strengths and limitations of environmental social enterprises considering the findings?
1 The social enterprise model is defined as an institution that combines the social logic of a non-profit with the commercial logic of a business to solve societal issues (Lee & Battilana 2014).
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1.4. Limitations
This study is based on ESEs working in the United Kingdom (UK). The considerable increase of social enterprises in the last decade has led some to view the country as a pioneer for these businesses. There have also been several developments to support the social enterprise sector such as new legislation like the Social Value Act and the community interest company model.
In response to the lack of empirical data in this area (Gibbs 2009), a total of nineteen in-depth interviews were carried out with ESEs across the UK, with a focus primarily on for-profit ESEs.
1.5. Structure of the thesis
The structure of the thesis is as follows: chapter 2 provides a background based on a literature review of the research topic; chapter 3 discusses relevant theories and concepts, specifically in regards to institutional economics theory and environmental governance; chapter 4 presents the methodology of the research and highlights the limitations of the study. In chapter 5, the results of the study are presented. Chapter 6 then responds to research question iv) regarding the strengths and limitations of ESEs. Finally, the paper concludes with the implications of the findings and suggestions of areas for further research.
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